Sensex, Nifty close at 24-month high; telcos, cement rally

Strong corporate earnings reported so far and expectations of a generous rate cut by the RBI lifted the Sensex and Nifty to a two-year highs on Tuesday, as Indian shares defied the subdued mood in global markets.

The Sensex topped the 20,000-mark for the first time since January 7, 2011, touching an intra-day high of 20,036.82, before settling at 19990.08, up 83.67 points over its previous close.

The Nifty rose 34.35 points to close at 6058.40, its highest closing since January 5.

After Infosys and TCS, it was Axis Bank's turn to surprise the market with better-than-expected third quarter numbers. Net interest income rose 17 percent and net profit by 22 percent; but more importantly, the bank managed to keep its asset quality stable.

Other than frontline companies like TCS, Infosys and Axis Bank, second line companies like Petronet LNG and Bajaj Finance too have posted a decent set of numbers. Brokers see this as an indication that the earnings downgrade cycle is over, and earnings upgrades could start kicking in sooner than expected.

Analyst expectations were quite low in the run-up to the third quarter earnings season, and the majority view was that earnings upgrades would take at least another couple of quarters to materialize.

Also, some economists feel there is enough ground for the RBI to cut the repo rate by 50 basis points, instead of the 25 basis points that the market is expecting.

"The pass through from oil prices has not been as strong as expected," RBS economist Sanjay Mathur told CNBC-TV18 in an interview today, on the reasons for decline in core inflation.

"This clearly shows that producers are finding it hard to pass on higher costs to consumers, because of weak demand. So, I think that clearly sets a stage for a 50 bps reduction at the forthcoming review," Mathur said.

Telecom shares Bharti Airtel and Idea Cellular surged on speculation the Indian mobile carriers may raise voice call tariffs. Idea closed the session up 8.27 percent, while Bharti, which gave some of its gains after the announcement of its CEO stepping down , closed up 4.81 percent.

Shares of cement companies rose over 2 percent on news of them drawing up plans to  question the legality of the cartelisation case when it comes up for hearing before the Competition Appellate Tribunal (Compat) on 29 January. (read full story)

Axis Bank closed the session up 2.64 percent after the bank reported a forecast beating 22 percent profit in the third quarter. (More on earnings)

ITC closed up 1.98 percent, gaining for a second day on value buying after falling 10.6 percent since index compiler FTSE cut its free-float weighting on the stock in mid-December, as of Friday's close, dealers say.

On the losing side, stocks like Coal India, Jindal Steel, Sterlite Industries and Sesa Goa lost anywhere between 1.5 percent to 0.7 percent.

Benchmarks regained their lost momentum in the late afternoon trade, boosted by reassuring third quarter corporate results and frenzied buying in telecom stocks. Sensex, which briefly touched the 20,000 mark, has once again positioned itself over the psychological level.

At 14.30 PM, the Sensex surged 104.502 points or 0.52% at 20010.91, and the Nifty rose 36  points or 0.48% at 6060.85.

Telecom stocks saw a sudden surge in the late trade on talks of imposition of voice tarrif as early as next week, which pushed benchmarks higher. Bharti Airtel jumped 5.2 percent while Idea Cellular gained a massive 7.75 percent. Reliance Communication surged 2.80 percent and Tata Communication rose 1.23 percent. Meanwhile, Bharti CEO Sanjay Kapoor announced his decision to step down as CEO of the comapny. He will be succeeded by Gopal Vittal.

Axis Bank is the latest company to post above-estimate Q3 numbers , aided by lower provisions. The stock climbed to a 52-week high of Rs 1407. ICICI Bank, which was trading at day's low, recovered 1.6 percent. Kotak Mahindra, Bank of Baroda and Power Finance Corporations were the other gainers. In the Midcap banking space, South Indian Bank was quoting at Rs 29.25, up Rs 0.90, or 3.17%. Bajaj Finance too replicated its performance of the previous quarters. The stock was quoting at Rs 876.25, up Rs 8.45, or 0.97%.

After breaching the psychological level of 20,000 for the first time since January 2011, the BSE benchmark has stayed largely flat-to-positive. The mood in the market remains cautiously optimistic on the back of positive Infosys and TCS results and deferral of the controversial general anti-avoidance rules (GAAR) to 2016.

At 12.15 PM, the Sensex was trading with 0.16% at 19938.27, and the Nifty with 0.22% gains at 6037.15. Cigarette major ITC was trading at Rs 282.35 up 1.6% from its previous close of Rs 277.90 and was among the top five gainers on the Sensex besides TCS, Bharti Airtel, Maruti Suzuki and  GAIL.

Auto makers shares have gained on hopes that a cut in interest rates will improve industry demand. In the automotive segment, Tata Motors, Bajaj Auto, Mahindra and Mahindra were up from 0.73 percent to over 1 percent. Here Motocorp declined 1.56 percent.

The paint companies in the midcap segment were seeing huge buying interests after Salimar paint announced its numbers. Shalimar Paints was trading with 16 percent gains and Berger Paints was up closed to 10 percent at Rs 164 a share.

South Indian Bank climbed 2.65 percent after the company posted a net profit of Rs 128.2 crore versus 102.3 crore (YoY). Other midcap gainers were SpiceJet, Shobha Developers and Amtek Auto.

Equity benchmarks erased most of the morning gains as profit-booking took centerstage. At 10.37 AM, the 30-share Sensex was up 17 points or 0.09% at 19923.41, and the Nifty up 8 points or 0.13% at 6032.05. Experts say a bit of consolidation was expected after yesterday's super rally.

The pocket that looked bright today is the cement counter. Ambuja Cement was quoting at Rs 196.75, up 3.33% while ACC was up 1.60 % at Rs 1382. UltraTech Cement was up 1.48% at Rs 1,893.35. Both Ambuja and ACC were top gainers on the Nifty. HOLCIM controlled ACC and Ambuja Cements have decided to seek shareholders approval to pay technology and knowledge fee to Holcim Technology.

IT counters were buzzing with Tata Consultancy Services (TCS) maintaining its lead on the Sensex after posting better-than-expected third quarter results on Monday. The TCS management also spoke about improving IT environment , which cheered investors. Infosys, after a stupendous run for the last three sessions, has slipped into the red with a marginal loss of 0.31 percent.

However, midcaps have spun into action. South Indian Bank and Axis Bank were trading with handsome gains ahead of their third quarter results. Top BSE midcap gainers were Berger Paints (up 6.35 percent), SpiceJet (up 4.99 percent on stake sale news ), Dewan Housing (4.87 percent), Amtek Auto (4.431 percent) and Shobha Developer ( 4.08 percent).

The Sensex briefly touched the psychological 20,000-mark in the first minute of trade, but pulled back immediately, tracking the weak trend in global markets. The Sensex was at 19936, up 29 points after touching 20,007.09 on opening. The Nifty was at 6030, up 6 points.

Brokers said any upside in the market here on would be gradual, as there are no fundamental triggers to support valuations.

TCS led gainers among large cap stocks, climbing over 3 percent to Rs 1379 on better-than-expected third quarter numbers announced post-market yesterday. Overall, most IT shares are doing well in early trade, after better than expected quarterly numbers from Infosys and TCS.

"We believe concerns around demand environment for India IT vendors appear to be overdone," brokerage Morgan Stanley said in its earnings review of TCS.

FMCG shares continued to struggle as investors are shuffling their portfolio in favour of stocks which are available at reasonable. Asian Paints and ITC were down around 1 percent each.

A slight easing in December inflation has strengthened the case for a rate cut by the RBI at its January 29 meeting. But many economists are not convinced that this could mark the beginning of a broad-based downtrend in interest rates. Also, the market appears to have priced in a 25 basis-point cut in repo rate.